For most Americans, their home represents security, as well as their biggest financial asset. The cost of insuring a home averaged $1000 in 2013, reported the Insurance Information Institute. What you pay could vary greatly from the average, depending on the value of your home and its contents and various risk factors. However, no matter what you pay now, the following tips can help you keep those costs under control, and may help you save.The amount an insurer will charge to insure any home depends on the risks involved. These include the risk of damage from natural disaster, such as wildfire, windstorm or snow collapse; the risk of human-caused damage, such as arson, vandalism and theft; the type of construction; and the cost of rebuilding. The greater your risk exposures, the higher your premiums will be. Some of these factors you can’t control. But there are some things homeowners can do to reduce their risk exposures and their insurance premiums as well.
- Get a preliminary quote on insurance before buying a home. Even if two properties seem similar in size, features and quality, the cost of insuring them can vary considerably. Location plays a big role in determining risk exposures, and the cost of homeowners insurance. These exposures include local crime rates, including theft, arson and vandalism. You’ll pay more to insure a home in a high-crime area than in a safer area. Fire safety also helps determine your insurance costs. It costs less to cover a house close to a fire hydrant or in a community that has a professional rather than a volunteer fire department. Likewise, you’ll pay more to cover a house in an area known to be at risk of wildfire, such as in canyons, near woodlands and in remote areas.
- Look at the home’s construction. Age of the building and construction type will affect your premiums. Newer buildings—or those whose electrical, heating and plumbing systems have been updated within the past 10 years—cost less to insure because these systems are less likely to fail and cause damage. In an earthquake-prone region, you’ll pay less to insure a woodframe dwelling bolted to its foundation, which will flex in a temblor, than a brick or masonry building. Conversely, you’ll pay less to insure a masonry or brick home in an area prone to windstorms.
- Remember that homeowners policies exclude coverage for flooding and earthquake damage. If you buy property in a flood or seismic zone, you must buy these coverages separately, adding to your overall insurance costs. In certain coastal areas, such as Florida, your policy might also have a separate (higher) deductible for windstorm damage, meaning you’ll have to bear more of the cost of any wind-related damage yourself.
- Don’t base your insurance limits on your home’s market value. Much of the value of a single-family home lies in the land. Insure your building and contents only. Even if a fire, windstorm or earthquake leveled your house, you would still have the value of the land.
- Get a quote on homeowners insurance from your auto or personal umbrella liability insurer. Most insurers will give you a discount if you buy more than one policy from them. Discounts generally range from 5 to 15 percent. Before committing, however, check whether the discounted policies are in fact cheaper than buying policies separately. We can help you obtain quotes from different insurers.
- Install protective devices. Many insurers offer discounts to insure homes with fire sprinklers and home fire/security alarm systems. Some systems might not qualify for discounts, so check with your insurer before installing anything.
- Ask about other discounts. Some insurers offer discounts to older policyholders (age 50 or 55+), to non-smoking households, to long-term policyholders and to those with good credit ratings.
- Consider retrofitting or remodeling to disaster-proof your home. Bolting a house to its foundation, reinforcing foundations and harnessing furnaces and hot water tanks to the walls can make it more resistant to earthquake damage. Homeowners in windstorm areas can add storm shutters, replace windows with shatter-proof glass and reinforce their roofs. Some of these precautions could qualify for discounts on your insurance; again, check with your insurer before making modifications.
- Raise your deductible. The deductible is the portion of a loss the insured must pay before the insurer begins to pay on a claim. Remember that the purpose of insurance is to ensure your financial security. If you have a low deductible, such as $250, the loss is unlikely to affect your financial security. However, small claims like these still require handling by the insurer, which costs money. Consider setting aside savings to handle these smaller losses instead—and save 15 percent or more on your premiums.
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